The OC could insist that the lot owner purchases the common area before proceeding with (b) but in this case, that might be mean-spirited if the owner already has exclusive use.
In NSW most balconies in relatively new blocks (post 1996) are common property but the lot owners have exclusive use. That’s not really all that significant. What is relevant is the look of the building, the maintenance of the area and the new structures, and the fact that the owner is utilising CP air space (above the balcony floor) to enhance the value of their property.
If it was easy to re-assign unit entitlements, that would be the way to go. But it isn’t and it’s expensive and that could be getting in the way of an opportunity to a) keep an owner happy and b) put some extra funds into the OC coffers.
I would be proposing a 99-year lease at a fee to be increased every year by CPI, which included a clause that the owner and all subsequent owners agreed to a by-law that said they would maintain the balcony to an acceptable standard at their own expense.